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Turn That Screw a Little Tighter

Posted by Larry Doyle on March 10, 2009 6:30 PM |

The screwing that Americans have taken on the development and marketing of the scam known as Auction Rate Preferred Securities (ARPS) continues. I have written at length on how the regulatory body, FINRA, actually owned $650 million in these screwsecurities at calendar year end 2006. I have persistently questioned how a regulatory body could possibly own a security which was knowingly mismarketed. Was FINRA negligent, complicit, or both? Did FINRA liquidate its position prior to the market imploding on all other owners? While many institutional owners of ARPS have been made whole, many retail clients are still left holding the bag.

Well, the screw that is ARPS just got turned another notch tighter. It turns out that the issuers of ARPS (municipalities, hospitals, colleges and universities, et al) are contractually obligated to pay an ongoing underwriting fee to the Wall Street banks despite the fact that these regularly scheduled auctions no longer occur.

What did that underwriting fee amount to in the last year? A cool $211 million. While the issuers pay, who do you think really pays? Taxpayers Billed $211 Million in Auction-Rate Failure. That’s me and you!!

Meanwhile, the outfit that is supposed to police the market and the products sold in order to protect investors just so happened to have a $650 million position in these bonds. I wrote¬†Let’s Really Question Ms. Schapiro, as she was the leader of FINRA when they had that position and is now the head of the SEC!! Is it any wonder why so many investors have lost such confidence in our markets. And still we pay!! The pain and indignity of this travesty with ARPS is just as great as the monetary fee charged.

What happened to FINRA’s bonds?? Do they still own them? If not when did they sell? To whom?? What price??


  • kd

    I check on a daily basis for the 2008 FINRA Financials. Any idea when they come out?

  • kd…In checking the 2007 Annual Report, reference is made to the Board of Directors as of April 18, 2008. Thus, I would guess we have at least another month of waitng prior to the 2008 Annual Report being released.

    Meanwhile the taxpayers continue to pay fees to underwrite failed auctions.


  • Mountainaires

    Shapiro says $943 Mil budget for SEC just isn’t enough! We want some tarp!

    Well, we want some answers, Ms. Shapiro. About those FINRA bonds….

    Thanks for harping on this, LD. I’m writing to my Senator to ask him for some answers.

    • Larry Doyle

      GO GET ‘EM!!!!

      Our taxpayer money continues to be spent subsidizing a scam in which FINRA was both negligent and complicit!!

      Joke’s on us.

  • EddieD

    Thank you for finding and publishing this information. FINRA had to know how ARS were being marketed to the public, they bought $650 million off someone. They couldn’t have missed it, it’s there mandate to know. So did they withhold this info from the public? Why? If FINRA didn’t understand the risk, and they didn’t know what they were buying, why? Were ARS misrepresented to them? How could anyone say the public should have known what they were buying when FINRA didn’t? Was the marketing so slick they fooled FINRA? What purpose did ARS serve in the FINRA portfolio? Why did they sell all of their holdings shortly before the market collapsed? Is there a connection between there involvement in ARS and their lack of effort in helping
    the rest of us? Why is FINRA late in filing their 2008 Financial? There is a thousand more questions we need answered. Everyone involved should be looking under every stone until every question is adequately answered.

    • Larry Doyle

      EddieD…all great questions and Sense on Cents is determined to stay after this until answers are found and released.

      Spread the word!!

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